2 February 2009

Scott St John
Chairman
Securities Industry Association

Dear Scott,

Re: NZX Consultation, December 2008 – SIA Submission

We acknowledge receipt of, and thank you for, the SIA letter and attachments of 30 January 2008. NZX is
particularly grateful for the SIA’s response given the compressed timeframe for feedback over a holiday period.

We will respond in writing to the substance of each matter raised in the SIA letter on Friday. However, we wanted
to, at the earliest opportunity:

• address the SIA’s concerns regarding the quality of the process and substance of the review of the NZX
Participant Rules; and
• set out how NZX intends to ensure that the quality of the remainder of the rules review improves.

The SIA’s concerns regarding the quality of the review to date

We wish to acknowledge that the draft rules and consultation paper provided in December were sub-standard. We
agree that this shifted responsibility for drafting, quality control and other work to participants and that this is
unacceptable. Understandably, discontent regarding the review appears to have spilled over into broader sentiment.

During December, in respect of the rules, roles were not defined clearly and NZX’s internal process was confused.
As a result, deadlines were not met and the draft rules suffered.

We acknowledge that, without a material change, the rules review is not likely to improve.

NZX’s proposed solution

In response to the SIA’s (and NZX’s own) concerns, NZX is placing Edwin Budding in charge of the rules review.
Edwin has been employed in the NZX legal and regulatory team since 2004. He has spent the last two years
focusing on Trading and Clearing and Settlement rules and policy in Australia and NZX considers that he has the
necessary skills and experience in relation to both rules and process management to effect significant improvement
to the quality of the review.

This week, Edwin intends to reach out to the SIA Rules Review Working Group to introduce himself, along with
the proposed the new process and timetable. Edwin will also be responsible for addressing the substantive
matters raised in the SIA’s letter of 30 January 2008.

For your information, Edwin’s contact details are set out below this letter. Edwin is primarily based in Australia,
but is committed to the revised review process outlined in this letter, including making himself freely available to
the SIA.

In order to support Edwin and ensure effective quality control, NZX intends to engage a senior legal consultant
with specialist experience in the area of market rules. This external support will be provided with a targeted brief
to review the internally-prepared draft rules prior to their external distribution. I also intend to engage actively in
the policy discussions and decisions.

NZX LIMITED. LEVEL 2, NZX CENTRE, 11 CABLE STREET, PO BOX 2959, WELLINGTON, NEW ZEALAND.
Phone +64 4 472 7599 Fax +64 4 496 2893 www.nzx.com 2

Timeliness and scope of the review

We acknowledge the SIA’s concerns regarding the timetable for the rules review and implementation of the
proposed amendments. As noted above, Edwin will provide a proposed new timetable for consultation that, once
agreed with the SIA, will be adhered to by NZX. Importantly, based on your feedback, the scope of the review of
the NZX Participant Rules has been revised to exclude revision of provisions relating to the regulation of
“advice”, including KYC and voice recording, as there is no current legislative impetus for revision.

We wish to thank you again for the frankness of your response, and for your unwavering engagement on these
issues, to date. Finally, we wish to reassure you that we are committed to addressing your concerns and improving
the rules review so that we can, together, build competitive and world-class market infrastructure in New Zealand.

Best,

Mark

E-mail: mark.weldon@nzx.com
Ph: +64 4 495 2818
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Edwin Budding
E-mail: edwin.budding@axe-ecn.com
DDI: +61 2 8356 9563
cell: +61 4 2055 2337

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